Semiconductor compression forces ABB to reduce sales prospects

The logo of the Swiss energy technology and automation group ABB is seen at the company’s annual press conference in Zurich, Switzerland on February 28, 2019. REUTERS / Arnd Wiegmann

  • Full-year sales forecast growth reduced to 6-8%
  • ABB joins with other companies to tackle chip shortage
  • Tight labor market adds to the challenges
  • ABB expects supply chain issues to continue

ZURICH, Oct.21 (Reuters) – ABB (ABBN.S) expects the tightening of the supply chain to continue next year, the Swiss engineering group said Thursday, as a shortage of semi -conductors has reduced its sales outlook for 2021.

The manufacturer of industrial robots and drives is the latest company to warn of shortages reducing its ability to meet demand from customers ramping up production after the pandemic-induced drop in activity.

As a result, ABB announced a 4% increase in sales in the third quarter, less than half of the 10% rate expected in July. He now expects full-year sales growth of 6% to 8%, slower than the previous outlook for a 10% increase.

“Semiconductors are the main problem, our products are very digital and they contain a lot of semiconductors, especially in machine automation, robotics and electrification,” Managing Director Rosengren told reporters.

Power cuts in China and logistical challenges such as port closures following the return of COVID-19 restrictions have also made it more difficult for ABB to get the parts it needed, he added.

“It was a struggle that all industries are feeling today, it’s not an ABB problem, it’s a clear market problem,” said Rosengren. “It will take a few more quarters before we see things better.”

Companies such as Canadian auto parts maker Magna (MG.TO) and Sweden’s Ericsson (ERICb.ST) have been hit by tight supply chains, while chip shortages have crippled some car assembly lines . N2RF0KI find out more

Swiss elevator and escalator maker Schindler (SCHP.S) pointed to supply chain issues when it released its results. Read more

Another problem was the shortage of skilled labor, especially in the United States, which affected ABB and its customers. Read more

Still, demand was strong, as the company’s orders jumped 26% as its backlog increased from $ 2.1 billion to $ 16 billion.

“Demand has exploded, but with the movement restrictions under COVID creating a tough job market to attract good workers,” Rosengren said.

The company was looking to mitigate the impact by redesigning products to use less rare chips, finding new suppliers, and building its own inventory.

ABB stock fell 5.8% at the start of trading in Switzerland following a more subdued outlook and third-quarter sales of $ 7.03 billion that missed expectations.

Operating income before interest, taxes, depreciation and amortization increased 32% to $ 1.06 billion, as expected, while net income was $ 652 million, slightly below expectations.

The supply squeeze could affect others, analysts say.

“The larger than expected negative supply chain impact could also impact other companies, including its electrical counterparts Siemens, Schneider and Legrand,” said Andreas Willi, analyst at JP Morgan.

Reporting by John Revill; Editing by Stephen Coates and Edmund Blair

Our standards: Thomson Reuters Trust Principles.

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